Kraken Robotics Inc.

This short form prospectus is a base shelf prospectus. This short form base shelf prospectus has been filed under legislation in each of the provinces and the territories of Canada that permits certain information about these securities to be determined after this prospectus has become final and that permits the omission from this prospectus of that information. The legislation requires the delivery to purchasers of a prospectus supplement containing the omitted information within a specified period of time after agreeing to purchase any of these securities, except in cases where an exemption from such delivery requirements has been obtained.

No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This short form base shelf prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by the persons permitted to sell such securities.

The securities offered hereunder have not been and will not be registered under the United States Securities Act of 1933, as amended (the “ U.S. Securities Act ” ), or any state securities laws. These securities will not be offered or sold to, or for the account or benefit of, persons within the United States or “ U.S. persons ” , as such term is defined in Regulation S under the U.S. Securities Act unless the securities are registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration requirements is available. See “ Plan of Distribution ” . This short form base shelf prospectus does not constitute an offer to sell or a solicitation of an offer to buy the securities offered hereby to, or for the account or benefit of, persons in the United States or U.S. persons.

Information has been incorporated by reference in this short form base shelf prospectus from documents filed with securities commissions or similar authorities in Canada . Copies of the documents incorporated herein by reference may be obtained on request without charge from secretary of the Company at 189 Glencoe Drive, Mount Pearl, NL, A1N 4P6, telephone 709-757-5757, and are also available electronically at www.sedar.com.

New Issue

April 6, 2021

SHORT FORM BASE SHELF PROSPECTUS

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$65,000,000 Common Shares Warrants Units Debt Securities Subscription Receipts

This short form base shelf prospectus (“ Prospectus ”) relates to the offering for sale from time to time (each, an “ Offering ”) by Kraken Robotics Inc. (the “ Company ” or “ Kraken ”) during the 25-month period that this Prospectus, including any of amendments thereto, remains valid, of up to $65,000,000 in the aggregate of: (i) common shares (“ Common Shares ”) of the Company; (ii) warrants (“ Warrants ”) to purchase other Securities (as defined below) of the Company; (iii) units (“ Units ”) comprising of one or more of the other Securities, (iv) senior and subordinated unsecured debt securities (collectively, “ Debt Securities ”), including debt securities convertible or exchangeable into other securities of the Company, and (v) subscription receipts (“ Subscription Receipts ” and together with the Common Shares, Warrants, Units and Debt Securities, collectively referred to herein as the “ Securities ”). The Securities may be offered separately or together, in amounts, at prices and on terms determined based on market conditions at the time of the sale and as set forth in an accompanying prospectus supplement (“ Prospectus Supplement ”).

All shelf information permitted under applicable laws to be omitted from this Prospectus will be contained in one or more Prospectus Supplements that will be delivered to purchasers together with this Prospectus, except in cases where an exemption from such delivery requirements has been obtained. Each Prospectus Supplement containing the specific terms of any Securities will be incorporated by reference into this Prospectus for the purposes of securities legislation as of the date of the Prospectus Supplement and only for the purposes of the distribution of the Securities to which the Prospectus Supplement pertains.

The specific terms of any Securities offered will be described in a Prospectus Supplement, including: (i) in the case of Common Shares, the number of Common Shares offered, the offering price (in the event the offering is a fixed price distribution), the manner of determining the offering price(s) (in the event the offering is a non-fixed price distribution) and any other specific terms; (ii) in the case of Warrants, the number of Warrants being offered, the offering price (in the event the offering is a fixed price distribution), the manner of determining the offering price(s) (in the event the offering is a non-fixed price distribution), the designation, number and terms of the other Securities purchasable upon exercise of the Warrants, and any procedures that will result in the adjustment of those numbers, the exercise price, the dates and periods of exercise and any other specific terms; (iii) in the case of Units, the number of Units offered, the offering price, the designation, number and terms of the other Securities comprising the Units, and any other specific terms; (iv) in the case of the Debt Securities, the specific designation of the Debt Securities, whether such Debt Securities are senior or subordinate, the aggregate principal amount of the Debt Securities being offered, the currency or currency unit in which the Debt Securities may be purchased, authorized denominations, any limit on the aggregate principal amount of the Debt Securities of the series being offered, the issue and delivery date, the maturity date, the offering price (at par, at a discount or at a premium), the interest rate or method of determining the interest rate, the interest payment date(s), any conversion or exchange rights that are attached to the Debt Securities, any redemption provisions, any repayment provisions and any other specific terms; and (v) in the case of Subscription Receipts, the number of Subscription Receipts being offered, the offering price (in the event the offering is a fixed price distribution), the manner of determining the offering price(s) (in the event the offering is a non-fixed price distribution), the terms, conditions and procedures for the conversion of the Subscription Receipts into other Securities, the designation, number and terms of such other Securities, and any other specific terms. A Prospectus Supplement relating to a particular offering of Securities may include terms pertaining to the Securities being offered thereunder that are not within the terms and parameters described in this Prospectus.

The Securities may be sold through underwriters or dealers, directly by us pursuant to applicable statutory exemptions, or through designated agents from time to time. See “ Plan of Distribution ”. The Prospectus Supplement relating to a particular offering of Securities will identify each underwriter, dealer or agent, as the case may be, engaged by the Company in connection with the offering and sale of the Securities, and will set forth the terms of the offering of such Securities, including, to the extent applicable, any fees, discounts or any other compensation payable to underwriters, dealers or agents in connection with the offering, the method of distribution of the Securities, the initial issue price (in the event that the offering is a fixed price distribution), the net proceeds to us and any other material terms of the plan of distribution.

The Securities may be sold from time to time in one or more transactions at a fixed price or prices or at non-fixed prices. This Prospectus may qualify an “at-the-market distribution”, as defined in National Instrument 44-102 — Shelf Distributions (“ NI 44-102 ”). If offered on a non-fixed price basis, the Securities may be offered at market prices prevailing at the time of sale, at prices determined by reference to the prevailing price of a specified security in a specified market or at prices to be negotiated with purchasers including sales in transactions that are deemed to be “at-the-market distributions”, including sales made directly on the TSX Venture Exchange (the “ TSXV ”) or other existing trading markets for the Securities, and as set forth in an accompanying Prospectus Supplement, in which case the compensation payable to an underwriter, dealer or agent in connection with any such sale will be decreased by the amount, if any, by which the aggregate price paid for the Securities by the purchasers is less than the gross proceeds paid by the underwriter, dealer or agent to the Company. The price at which the Securities will be offered and sold may vary from purchaser to purchaser and during the period of distribution. See “ Plan of Distribution ”.

This Prospectus does not qualify the issuance of Debt Securities in respect of which the payment of principal and/or interest may be determined, in whole or in part, by reference to one or more underlying interests including, for example, an equity or debt security, a statistical measure of economic or financial performance including, but not limited to, any currency, consumer price or mortgage index, or the price or value of one or more commodities, indices or other items, or any other item or formula, or any combination or basket of the foregoing items. For greater certainty, this Prospectus may qualify for issuance Debt Securities in respect of which the payment of principal and/or interest may be determined, in whole or in part, by reference to published rates of a central banking authority or one or more financial institutions, such as a prime rate or bankers’ acceptance rate, or to recognized market benchmark interest rates such as the London Inter-Bank Offered Rate (“ LIBOR ”), Euro Inter-Bank Offered Rate (“ EURIBOR ”) or a United States federal funds rate.

over-allot securities in connection with such distribution or effect any other transactions that are intended to stabilize or maintain the market price of the offered Securities or securities of the same class as the Securities distributed under the “at-the-market distribution”, including selling an aggregate number or principal amount of Securities that would result in the underwriter creating an over-allocation position in the Securities.

In connection with any offering of the Securities, subject to applicable laws and other than an “at-the-market distribution”, the underwriters or agents may over-allot or effect transactions that stabilize or maintain the market price of the offered Securities at a level above that which might otherwise prevail on the open market. Such transactions, if commenced, may be interrupted or discontinued at any time. See “ Plan of Distribution ”.

The Common Shares are listed on the TSXV under the trading symbol “PNG” and trade in the United States on the OTCQB under the trading symbol “KRKNF”. On April 5, 2021, the last trading day prior to the filing of this Prospectus, the closing prices of the Common Shares listed on the TSXV and the OTCQB were $0.73 and US$0.582405 respectively.

Unless specified in the applicable Prospectus Supplement, there is no market through which the Subscription Receipts, Warrants, Units and Debt Securities may be sold and purchasers may not be able to resell the Subscription Receipts, Warrants, Units and Debt Securities purchased under this Prospectus and the Prospectus Supplement. This may affect the pricing of the Subscription Receipts, Warrants, Units and Debt Securities in the secondary market, the transparency and availability of trading prices, the liquidity of the Subscription Receipts, Warrants, Units and Debt Securities and the extent of issuer regulation. See “ Risk Factors ”.

Prospective investors should be aware that the purchase of Securities may have tax consequences that may not be fully described in this Prospectus or in any Prospectus Supplement, and should carefully review the tax discussion, if any, in the applicable Prospectus Supplement and in any event consult with a tax advisor.

An investment in the Securities is subject to a number of risks, including those risks described in this Prospectus and documents incorporated by reference into this Prospectus. See “ Risk Factors ” in this Prospectus and in the Company’s Annual Information Form and Interim MD&A incorporated by reference herein.

No person is authorized by the Company to provide any information or to make any representation other than as contained in this Prospectus in connection with the issue and sale of the Securities offered hereunder.

No underwriter has been involved in the preparation of this Prospectus or performed any review of the contents hereof.

Vice-Admiral Michael Connor (Director) who resides outside of Canada, has appointed Gowling WLG (Canada) LLP, 1 First Canadian Place, 100 King Street West, Suite 1600, Toronto, Ontario M5X 1G5, as his agent for service of process in Canada. Prospective purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the party has appointed an agent for service of process, see “ Risk Factors ”.

In this Prospectus, references to the “ Company ”, “ Kraken ”, “ we ”, “ us ” and “ our ” refer to Kraken Robotics Inc. and/or, as applicable, one or more of its subsidiaries. The Company’s head office is located at 189 Glencoe Drive, Mount Pearl, NL, A1N 4P6, and its registered office is located at Suite 1600, 100 King Street West, Toronto, ON M5X 1G5.

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GENERAL MATTERS.............................................................................................................................................. 1 CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION ........................................................ 1 EXEMPTION ............................................................................................................................................................ 2 TRADEMARKS AND SERVICE MARKS ................................................................................................................. 2 MARKETING MATERIALS ...................................................................................................................................... 3 DOCUMENTS INCORPORATED BY REFERENCE .............................................................................................. 3 THE COMPANY ....................................................................................................................................................... 4 CONSOLIDATED CAPITALIZATION ...................................................................................................................... 7 USE OF PROCEEDS .............................................................................................................................................. 7 DESCRIPTION OF SECURITIES BEING DISTRIBUTED ...................................................................................... 8 PLAN OF DISTRIBUTION ..................................................................................................................................... 12 RISK FACTORS .................................................................................................................................................... 13 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS .................................................................................... 16 LEGAL MATTERS ................................................................................................................................................. 16 AUDITORS, TRANSFER AGENT AND REGISTRAR ........................................................................................... 16 STATUTORY AND CONTRACTUAL RIGHTS OF WITHDRAWAL AND RESCISSION ...................................... 16 CERTIFICATE OF THE COMPANY .................................................................................................................... C-1

GENERAL MATTERS

Investors should rely only on the information contained in or incorporated by reference into this Prospectus or any applicable Prospectus Supplement. The Company has not authorized anyone to provide investors with different information. Information contained on the Company’s website shall not be deemed to be a part of this Prospectus or incorporated by reference herein or in any applicable Prospectus Supplement and may not be relied upon by prospective investors for the purpose of determining whether to invest in the Securities qualified for distribution under this Prospectus. The Company is not making an offer of these Securities in any jurisdiction where the offer is not permitted. Investors should not assume that the information contained in this Prospectus is accurate as of any date other than the date on the front of this Prospectus or the date of the relevant document incorporated by reference. The Company’s business, operating results, financial condition and prospects may have changed since that date.

In this Prospectus, unless stated otherwise or the context requires otherwise, all dollar amounts are expressed in Canadian dollars.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This Prospectus and the documents incorporated by reference herein contain certain “forward-looking information” and “forward-looking statements” (collectively, “ forward-looking statements ”) which are based upon the Company’s current internal expectations, estimates, projections, assumptions and beliefs. Such statements can be identified by the use of forward-looking terminology such as “expect”, “believe”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate”, “project”, “continue”, “plan”, “aim” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussions of strategy. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance, or other statements that are not statements of fact. The Company has based these forward-looking statements on current expectations and projections about future events and financial trends that they believe may affect the Company’s financial condition, results of operations, business strategy and financial needs, as the case may be.

Such forward-looking statements are made as of the date of this Prospectus, or in the case of documents incorporated by reference herein, as of the date of each such document. Forward-looking statements in this Prospectus and the documents incorporated by reference herein include, but are not limited to, statements with respect to:

the performance of the Company’s business and operations;
the intention to grow the business, operations and potential activities of the Company;
the competitive and business strategies of the Company;
the Company’s anticipated operating cash requirements and future financing needs;
the anticipated future gross revenues and profit margins of the Company’s operations;
the Company’s expectations regarding its revenue, expenses and operations;
the applicable laws, regulations and any amendments thereof;
expectations with respect to the advancement and adoption of new products;
the acceptance by customers and the marketplace of new products and solutions;
the ability to attract new customers and develop and maintain existing customers, including its engagements with the Royal Danish Navy and the Polish Navy;
the ability to protect, maintain and enforce the Company’s intellectual property rights;
the ability to successfully leverage current and future strategic partnerships and alliances;
the ability to attract and retain personnel;
the anticipated labour and materials costs;
the Company’s intended use of the NRC-IRAP grant funding for the Company’s proposed ThunderFish® XL autonomous underwater vehicle and the capabilities thereof, see “ The Company – Recent Developments ”;
the Company’s ability to successfully integrate its minehunting systems with the Royal Danish Navy and the Polish Navy, see “ The Company – Recent Developments ”;
the Company’s competitive condition and expectations regarding competition, including pricing and demand expectations and the regulatory environment in which the Company operates;

the anticipated trends and challenges in the Company’s business and the markets and jurisdictions in which the Company operates;
the impact of COVID-19 on the Company’s business;
the completion of the Offerings and the receipt of all regulatory and stock exchange approvals in connection therewith;
the use of the net proceeds of the Offering; and
the Company’s business objectives and milestones and the anticipated timing of execution.

Forward-looking statements reflect the Company’s current expectations and assumptions, and are subject to a number of known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Should one or more of these risks and uncertainties materialize, or should underlying factors or assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. In making the forward-looking statements included in this Prospectus, and the documents incorporated by reference herein, the Company has made various material assumptions, including, but not limited to:

the Company will continue to be in compliance with regulatory requirements;
the Company will have sufficient working capital and be able to secure additional funding necessary for the continued operation and development of the Company; and
key personnel will continue their employment with the Company and the Company will be able to obtain and retain additional qualified personnel, as needed, in a timely and cost-efficient manner.

Purchasers are cautioned that the above list of cautionary statements is not exhaustive. A number of factors could cause actual events, performance or results to differ materially from what is projected in forward-looking statements. The purpose of forward-looking statements is to provide the reader with a description of management’s expectations, and such forward-looking statements may not be appropriate for any other purpose. You should not place undue reliance on forward-looking statements contained in this Prospectus or in any document incorporated by reference herein. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

The forward-looking statements contained in this Prospectus and the documents incorporated by reference herein are expressly qualified in their entirety by the foregoing cautionary statement. Investors should read this entire Prospectus, including the Annual Information Form, and each applicable Prospectus Supplement, and consult their own professional advisers to ascertain and assess the income tax and legal risks and other aspects associated with holding Securities.

EXEMPTION

Pursuant to a decision of the Autorité des marchés financiers dated March 22, 2021, the Company was granted a permanent exemption from the requirement to translate into French this Prospectus as well as the documents incorporated by reference therein and any Prospectus Supplement to be filed in relation to an “at-the-market distribution”. This exemption is granted on the condition that this Prospectus and any Prospectus Supplement (other than in relation to an “at-the-market distribution”) be translated into French if the Company offers Securities to Québec purchasers in connection with an offering of Securities other than in relation to an “at-the-market distribution”.

TRADEMARKS AND SERVICE MARKS

This prospectus includes trademarks, trade names and service marks which are protected under applicable intellectual property laws for use in connection with the operation of our business, and which are the property of the Company. All other trade names, trademarks or service marks appearing in this prospectus that are not identified as marks owned by us are the property of their respective owners. Solely for convenience, trademarks, service marks and trade names referred to in this prospectus may be listed without the ®, (TM) and (sm) symbols, however, we will assert, to the fullest extent under applicable law, our applicable rights in these trademarks, service marks and trade names.

MARKETING MATERIALS

Any template version of marketing materials (as such terms are defined in National Instrument 41-101 General Prospectus Requirements ) that are utilized in connection with the distribution of Securities will be filed under the Company’s profile on SEDAR. In the event that such marketing materials are filed after the date of the applicable Prospectus Supplement for the offering and before termination of the distribution of such Securities, such filed versions of the marketing materials will be deemed to be incorporated by reference into the applicable Prospectus Supplement for the purposes of the distribution of the Securities to which the Prospectus Supplement pertains.

DOCUMENTS INCORPORATED BY REFERENCE

Information has been incorporated by reference in this Prospectus from documents filed with securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from Joseph MacKay, Chief Financial Officer of the Company at 189 Glencoe Drive, Mount Pearl, NL, A1N 4P6, telephone 709-757-5757, and are also available electronically on SEDAR.

The following documents of the Company filed with the securities commissions or similar authorities in Canada are incorporated by reference in this Prospectus:

the annual information form of the Company dated August 27, 2020 (the “ Annual Information Form ”) in respect of the fiscal year ended December 31, 2019;
the audited consolidated financial statements of the Company and the notes thereto as at and for the fiscal years ended December 31, 2019 and 2018, together with the auditor’s report thereon (the “ Annual Financial Statements ”);
the management’s discussion and analysis of the Company for the fiscal year ended December 31, 2019 (the “ Annual MD&A ”);
the management information circular dated May 19, 2020 in respect of the Company’s 2020 annual general and special meeting held on June 26, 2020;
the material change report dated October 2, 2020 in respect of the Company’s announcement that it entered into a “bought deal” financing of Common Shares for aggregate gross proceeds of $10,050,000;
the material change report dated October 6, 2020 in respect of the Company’s announcement that it entered into an agreement with the Danish Ministry of Defence, Acquisition and Logistics Organization to supply minehunting sonar equipment to the Royal Danish Navy valued at approximately $36 million over a two year equipment acquisition phase;
the material change report dated October 27, 2020 in respect of the Company’s announcement that it closed a previously announced “bought deal” financing of 15,500,000 Common Shares for aggregate gross proceeds of $10,385,000;
the unaudited condensed consolidated interim financial statements of the Company as at and for the three and nine months ended September 30, 2020 and 2019 and related notes thereto (the “ Interim Financial Statements ”); and
the management’s discussion and analysis of the Company for the three and nine months ended September 30, 2020 (the “ Interim MD&A ”).

Any document of the type referred to in Section 11.1 of Form 44-101F1 – Short Form Prospectus Distributions filed by the Company with a securities commission or similar regulatory authority in Canada after the date of this Prospectus and prior to 25 months from the date hereof shall be deemed to be incorporated by reference in this Prospectus.

Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference in this Prospectus shall be deemed to be modified or superseded for the purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference in this Prospectus modifies or supersedes that statement. Any statement so modified or superseded shall not constitute a part of this Prospectus except as so modified or superseded. The modifying or superseding statement need not state that it has modified

or superseded a prior statement or include any information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.

Upon filing of a new Annual Information Form and related Annual Financial Statements with, and where required, accepted by, the applicable securities regulatory authorities during the currency of this Prospectus, the previous Annual Information Form, including all amendments thereto, the previous Annual Financial Statements and all Interim Financial Statements (including any Interim MD&A’s related thereto), material change reports and management information circulars filed prior to the commencement of the fiscal year in which the new Annual Information Form is filed, shall be deemed no longer to be incorporated into this Prospectus for purposes of future offers and sales of Securities hereunder.

A Prospectus Supplement containing the specific terms of any Securities offered thereunder will be delivered to purchasers of such Securities together with this Prospectus to the extent required under applicable securities laws and will be deemed to be incorporated by reference into this Prospectus as of the date of such Prospectus Supplement solely for the purposes of the Securities offered hereunder and thereunder.

THE COMPANY

Summary of the Business

Kraken is a marine technology company providing ultra-high-resolution software-centric sensors, power systems, and underwater robotic systems. The Company’s mission is to become a leading provider of underwater robotics equipment and services. At December 31, 2020, Kraken had 131 employees with a head office in Mt. Pearl, Newfoundland, Canada and has shipped product to customers in 10 countries.

Kraken has a highly capable team of engineers, scientists, and technicians with specialized skills. Scientific staff have world-leading expertise in sonar design, remote sensing, and signal processing for synthetic aperture sonar, anti-submarine warfare, and 3D optical imaging. Kraken’s electrical and mechanical engineering teams have extensive experience designing tethered/towed and untethered/free-swimming underwater vehicles, custom payload sections, and launch and recovery systems. Kraken’s software engineering group develops applications for data acquisition, real-time processing, vehicle control, 3D visualization, telemetry, artificial intelligence, machine learning and data post-processing. The Company is supported by a team of technicians that perform assembly, inspection, testing, calibration, and troubleshooting of mechanical and electrical systems. Kraken’s technical staff also have extensive experience performing system integration onboard customer-owned vehicles and conducting operations at sea to collect data for a variety of surveys, technical demonstrations, and collaborative research projects.

Kraken’s products are sold into both the manned and the unmanned maritime vehicle (“ UMV ”) market. The UMV market can be divided into unmanned underwater vehicles (“ UUVs ”) and unmanned surface vessels (“ USVs ”). UUVs are either autonomous underwater vehicles, remotely operated vehicles, or towed underwater vehicles tethered to a ship and towed beneath the surface of the water. UUVs are used extensively for military and commercial applications, such as undersea search and survey missions. USVs may be remotely operated or be fully autonomous.

Kraken was founded with the objective of commercializing a software-centric version of SAS at the lowest cost in the market to compete with more hardware-dependent and expensive SAS solutions. SAS is an advanced imaging technology which dramatically improves seabed surveys by providing ultra-high-resolution imagery at superior area coverage rates (“ ACRs ”) as compared to conventional side scan sonar (“ SSS ”) technologies. These legacy SAS systems were seen as the domain of global defense contractors using SAS for military surveillance purposes to detect seabed mines or other types of unexploded ordnances. SAS is the next generation of sonar, following side scan sonar and multi-beam echo sounders, which while capable of producing high resolution images of objects on the seabed, only do so at short range and corresponding low ACR. SAS, on the other hand, is capable of producing ultra-high-resolution imagery at long ranges, which can be more than ten times the range of conventional side scan sonar, all while achieving significantly higher ACR.

SAS is the underwater equivalent of synthetic aperture radar used in the satellite and communications industry. This technology is ‘rare air technology’ with Kraken having only a handful of competitors at the high end of the market. Customers using SAS technology are looking to get maximum ACR at the highest resolution, for the lowest cost. One factor affecting ACR is the length of the aperture (antenna). Traditional sonar technology such as SSS uses real apertures that are limited by the size of the underwater vehicle they are deployed on. SAS, on the other hand, uses the motion of the underwater vehicle along with highly sophisticated signal processing algorithms to ‘spoof’ the system into thinking the aperture is 40-50 times longer than it really is. The result is up to a 10-times increase in area coverage rates over traditional SSS. In other words, more area can be surveyed at a much higher resolution in less time.

In addition to improved area coverage rate, Kraken provides this data in real time, without the traditional limitations of extensive post mission processing. Furthermore, all of Kraken’s SAS systems are Interferometric, meaning that they are able to simultaneously provide real-time ultra-high definition SAS bathymetry that is co-registered with the SAS imagery. Through a partnership with Teledyne CARIS Inc., a business unit of Teledyne Technologies Inc., Kraken also offers Caris Onboard, an automated hydrographic processing workflow which can combine the imagery and bathymetry into real-time hydrographic databases certified to IHO SP44 standards.

As the Company has grown, it has developed additional sensors as well as designed and produced its own UUVs. In addition to selling products, Kraken has a nascent Robotics as a Service (“ RaaS ”) business. The Company believes that certain customers would prefer to hire the Company to provide product output to them (i.e. imaging and bathymetry data) using the Company’s own equipment. This is the genesis of our RaaS offering. Kraken has branded its RaaS offering as SeaScout®, a complete seabed mapping and intelligence solution.

Inter-Corporate Relationships

As at the date hereof, the Company’s corporate structure consists of the following wholly-owned subsidiaries:

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Kraken Robotics Inc.
(CBCA)
Kraken Robotic Systems Inc.
(CBCA)
Kraken Robotics US Inc. Kraken Robotik GmbH Kraken Power GmbH Kraken Denmark ApS Ocean Discovery Inc.
(Delaware, USA) (Germany) (Germany) (Denmark) (CBCA)
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Recent Developments

On August 31, 2020, the Company announced the award of a non-refundable $2,909,891 grant from the National Research Council of Canada Industrial Research Assistance Program (“ NRC-IRAP ”). Funding will be provided over a 26-month period and will be used by the Company to support the development of its seabed resident ThunderFish® XL autonomous underwater vehicle (“ ThunderFish ”) which will possess capabilities lacking in similarly sized underwater vehicles in use today, including (i) the ability to transition, in-mission, from high-speed survey mode to “zero” speed hovering mode; (ii) through-the sensor acoustic, laser and optical target detection, image recognition and inspection; and, (iii) functional onboard sensors to improve vehicle navigational accuracy.

On September 8, 2020, Kraken secured a contract through a competitive bid process with the Danish Ministry of Defence, Acquisition and Logistics Organization to supply mine-hunting sonar equipment to the Royal Danish Navy. Under the program, Kraken will provide its minehunting KATFISH™ towed SAS system (the “ KATFISH System ”), the Tentacle® Winch system (the “ Tentacle System ”), and Autonomous Launch and Recovery System (“ ALARS ”) to be integrated onboard the Royal Danish Navy’s optionally unmanned surface vessels. The aggregate value of the contract is $36 million, deliverable over a 5 to 10 year period, with the majority of funds (approximately $22 million) to be received over the two to three year product acquisition phase, with the remaining funds (approximately $14 million) being allocated to post sales service arrangements which will continue for the duration of the remaining term. The contract was entered into in the ordinary course, in accordance with applicable European procurement laws, and on terms normally observed in agreements of such nature.

Also on September 8, 2020, Kraken entered into an agreement with Remontowa Shipbuilding S.A. to supply the Polish Navy with the KATFISH System, the Tentacle system, and ALARS. Kraken’s equipment will be integrated onboard the Polish Navy’s new KORMORAN II Mine CounterMeasure vessels in Gdansk, Poland.

On September 21, 2020, Kraken announced that it had successfully completed over 3 weeks of sea trials in Nova Scotia with its SeaScout® system, consisting of the KATFISH System, the Tentacle System and ALARS, installed on the company’s research and survey vessel ‘Ocean Seeker’ .

On October 1, 2020, Kraken announced that it entered into an agreement with Canaccord Genuity Corp. as lead underwriter on behalf of a syndicate of underwriters (the “ Underwriters ”) pursuant to which the Underwriters agreed to purchase, on a “bought deal” basis, 15,000,000 Common Shares at a price of $0.67 per Common Share (the “ October 2020 Offering Price ”) for aggregate gross proceeds of $10,050,000 to the Company (the “ October 2020 Offering ”). As part of the October 2020 Offering, the Underwriters were granted an over-allotment option to purchase up to an additional 2,250,000 Common Shares the October 2020 Offering Price, exercisable in whole or in part at any time for a period of 30 days from the closing date of the October 2020 Offering.

On October 26, 2020, Kraken completed the October 2020 Offering, whereby a total of 15,500,000 Common Shares were sold at the October 2020 Offering Price for gross proceeds of $10,385,000, inclusive of the partial exercise of the over-allotment option.

On October 28, 2020, Kraken announced that Dive Technologies Inc., a Quincy, Massachusetts-based company, completed successful sea trials of a Large Displacement Autonomous Underwater Vehicle (LD-AUC) which was powered by Kraken’s pressure tolerant batteries.

On November 6, 2020, Kraken announced that it completed its third offshore data acquisition and technology demonstration campaign as part of the OceanVision project (“ OceanVision ”), a 3-year, $19 million project funded by the Ocean Supercluster, industry partners and Kraken, whereby Kraken continues to develop new sensor and underwater vehicle technologies and conduct trials during several offshore technology demonstration campaigns.

On February 16, 2021, Kraken announced a new contract for subsea batteries totalling $1.5 million, to be fulfilled in 2021, and new funding awards totalling $2.0 million across three of the Company’s projects.

On February 23, 2021, Kraken announced that its subsidiary, Kraken Robotic Systems Inc., earned ISO 9001:2015 certification for its Quality Management System (QMS), including manufacturing sites located in Mount Pearl, Newfoundland and Dartmouth, Nova Scotia.

On March 4, 2021, Kraken announced new contracts for subsea batteries totalling $0.7 million, to be fulfilled in 2021, and funding awards totalling $1.5 million across two of the Company’s projects.

COVID-19 Pandemic

The outbreak of the novel coronavirus, commonly referred to as “COVID-19”, has spread throughout North America and Europe, causing companies and various international jurisdictions to impose restrictions such as quarantines, business closures and travel restrictions. While these effects are expected to be temporary, the duration of the business disruptions internationally and their impacts on the Company cannot be reasonably estimated at this time.

As of the date of this Prospectus, the Company has successfully continued operations under COVID-19 protocols. COVID-19 has not resulted in any material delays in the development or testing of our material development projects. The Company is not currently experiencing any significant delays or interruptions in service or product delivery. The Company’s production schedule has continued throughout COVID-19 on a modified employee schedule, with certain non-production employees working remotely. The Company has been able to operate relatively unaffected by the COVID-19 pandemic. The most notable impact has been that certain business development pursuits have taken longer to complete as international travel restrictions have hindered the performance and attendance of live product demonstrations, particularly for the Company’s newer products.

Notwithstanding the foregoing, if the Company or its vendors and suppliers are unable to continue operations or keep up with increasing demands as a result of COVID-19, customers may experience delays or interruptions in service or the delivery of products, which may be detrimental to the Company’s reputation and business. The

Company cautions that it is impossible to fully anticipate or quantify the effect and ultimate impact of the COVID19 pandemic as the situation is rapidly evolving. The extent to which COVID-19 impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken by governments to contain it or treat its impact, including shelter in place directives, which, if extended, may impact the economies in which the Company now operates, or may in the future operate, key markets into which the Company sells products and delivers services, and markets through which the Company’s key suppliers source their products.

For additional information see also “ Risk Factors – Implications of the COVID-19 Pandemic ”.

CONSOLIDATED CAPITALIZATION

The applicable Prospectus Supplement will describe any material changes, and the effect of such material changes, on the share and loan capitalization of the Company that will result from the issuance of Securities pursuant to each Prospectus Supplement.

Other than in connection with the October 2020 Offering which resulted in the issue of 15,500,000 Common Shares, since September 30, 2020, the date of the outstanding share data described in the Company’s most recently filed Interim Financial Statements, there have been no other material changes to the Company’s consolidated capitalization. The Company’s consolidated capitalization as at September 30, 2020 and as at April 5, 2021 are set out in the following table:

Share Capital Common Shares Warrants Options	September 30, 2020 (unaudited)	April 5, 2021 (unaudited)
	Unlimited common shares 150,408,853 550,000 10,695,167	Unlimited common shares 168,511,764 Nil 8,539,999

USE OF PROCEEDS

Unless otherwise indicated in the applicable Prospectus Supplement, the Company intends to use the net proceeds from the sale of Securities for working capital requirements or for other general corporate purposes. Each applicable Prospectus Supplement will contain specific information concerning the use of proceeds from that sale of Securities by the Company. Notwithstanding the above, the Company’s management has broad discretion in the application of proceeds of an offering of Securities. On the basis of results obtained or for other sound business reasons, the Company may re-allocate funds as required. Accordingly, the Company’s actual use of proceeds may vary significantly from any proposed use of proceeds disclosed in any applicable Prospectus Supplement. See “ Risk Factors – Discretion in the Use of Proceeds ”.

Business Objectives and Milestones

The primary business objectives for the Company over the next 12 months are to:

Execute on recent large KATFISH™ and ALARS orders, including those from the Royal Danish Navy and the Polish Navy. Full delivery of these orders is anticipated between Q4 2021 and 2023 and costs are expected to align with Kraken’s historical production expenses and margins;
Close on numerous KATFISH™ and Aquapix MINSAS pursuits in both the defense and commercial market;
Continue to advance our RaaS business model as follows:
a. Additional growth of the OceanVision project for ocean floor mapping and subsea asset inspection using Kraken’s KATFISH™, ThunderFish, Aquapix and SeaVision products (“ SeaVision ”). This objective is part of the Ocean SuperCluster project that is funded in part by the Government of Canada. OceanVision is expected to be completed in Q4 2022 in which Kraken’s remaining commitment is $2.4 million; and

b. Accelerate the expansion of the SeaVision product line into additional markets;
Continue to make contract progress with Kraken Power GmbH products, including with the United States Navy and U.S. defense contractors, and move ahead with Naval Sea Systems Command (“ NAVSEA ”) battery certification. Kraken is currently in the process of obtaining NAVSEA certification, expected by Q2 2022; and
Further advance new product initiatives towards commercialization as part of OceanVision, including ThunderFish and Multispectral SAS, the Company’s in-development ultra-wideband acoustic remote sensing system for seafloor imaging and mapping.

The foregoing business objectives are being funded through existing capital resources and anticipated future operating revenue.

Significant events that need to occur for the business objectives to be accomplished are as follows:

Continue to build and acquire sensor and system products for use in RaaS business and evaluate additional services to provide more complete service solution to potential RaaS customers. Kraken expects to execute on this objective as part of OceanVision anticipated to be completed by Q4 2022;
Continue to engage with our U.S. consultant to advance NAVSEA battery certification. Kraken expects to receive NAVSEA certification to enable the sale of bulk quantities of batteries to customers in the United States by Q2 2022;
Complete additional field evaluation trials of our sensor and systems products; and
Continue to partner with AUV manufacturers, defense contractors, and system integrators who incorporate Kraken sensors and systems into their overall offerings.

See also “The Company – Recent Developments – COVID-19 Pandemic” and “Risk Factors - Implications of the COVID-19 Pandemic”.

DESCRIPTION OF SECURITIES BEING DISTRIBUTED

The following is a brief summary of certain general terms and provisions of the Securities that may be offered pursuant to this Prospectus. This summary does not purport to be complete. The particular terms and provisions of the Securities as may be offered pursuant to this Prospectus will be set forth in the applicable Prospectus Supplement pertaining to such offering of Securities, and the extent to which the general terms and provisions described below may apply to such Securities will be described in the applicable Prospectus Supplement.

Common Shares

The authorized capital of the Company consists of an unlimited number of Common Shares. As at April 5, 2021, the Company had 168,511,764 Common Shares issued and outstanding.

Holders of Common Shares are entitled to dividends if, as and when declared by the board of directors of Kraken, to receive notice of and one vote per Common Share at meetings of shareholders and, upon liquidation, dissolution or winding up of Kraken, to share rateably in such assets of Kraken as are distributable to the holders of Common Shares.

Common Shares may be sold separately or together with certain other Securities under this Prospectus. Common Shares may also be issuable on conversion, exchange, exercise or maturity of certain other Securities qualified for issuance under this Prospectus.

Warrants

Warrants may be offered separately or together with other Securities, as the case may be. Each series of Warrants may be issued under a separate warrant indenture or warrant agency agreement to be entered into between the

Company and one or more banks or trust companies acting as Warrant agent or may be issued as stand-alone contracts. The applicable Prospectus Supplement will include details of the Warrant agreements, if any, governing the Warrants being offered. The Warrant agent, if any, will be expected to act solely as the agent of the Company and will not assume a relationship of agency with any holders of Warrant certificates or beneficial owners of Warrants. The following sets forth certain general terms and provisions of the Warrants that may be offered under this Prospectus. The specific terms of the Warrants, and the extent to which the general terms described in this section apply to those Warrants, will be set forth in the applicable Prospectus Supplement.

A copy of any warrant indenture or any warrant agency agreement relating to an offering of Warrants will be filed by the Company with the relevant securities regulatory authorities in Canada after it has been entered into by the Company.

Each applicable Prospectus Supplement will set forth the terms and other information with respect to the Warrants being offered thereby, which may include, without limitation, the following (where applicable):

the designation of the Warrants;
the aggregate number of Warrants offered and the offering price;
the designation, number and terms of the other Securities purchasable upon exercise of the Warrants, and procedures that will result in the adjustment of those numbers;
the exercise price of the Warrants;
the dates or periods during which the Warrants are exercisable;
the designation and terms of any securities with which the Warrants are issued;
if the Warrants are issued as a unit with another Security, the date on and after which the Warrants and the other Security will be separately transferable;
any minimum or maximum amount of Warrants that may be exercised at any one time;
whether such Warrants will be listed on any securities exchange;
any terms, procedures and limitations relating to the transferability, exchange or exercise of the Warrants;
certain material Canadian tax consequences of owning the Warrants; and
any other material terms and conditions of the Warrants.

Units

The Company may issue Units comprised of one or more of the other Securities described herein in any combination. Each Unit may be issued so that the holder of the Unit is also the holder of each Security included in the Unit; thus, the holder of a Unit may have the rights and obligations of a holder of each included Security. Any Unit agreement under which a Unit may be issued may provide that the Securities included in the Unit may not be held or transferred separately at any time or at any time before a specified date.

Each applicable Prospectus Supplement will set forth the terms and other information with respect to the Units being offered thereby, which may include, without limitation, the following (where applicable):

the designation, number and terms of the Units and of the Securities comprising the Units, including whether and under what circumstances those Securities may be held or transferred separately;
any provisions for the issuance, payment, settlement, transfer or exchange of the Units or of the Securities comprising the Units;
certain material Canadian tax consequences of owning the Securities comprising the Units; and
any other material terms and conditions of the Units.

Debt Securities

The Debt Securities will be senior or subordinated unsecured indebtedness of the Company as described in the relevant Prospectus Supplement. If the Debt Securities are senior indebtedness, they will rank equally and rateably with all other unsecured indebtedness of the Company, from time to time issued and outstanding, which is not subordinated.

If the Debt Securities are subordinated indebtedness, they will rank equally and rateably with all other subordinated Debt Securities from time to time issued and outstanding. In the event of the insolvency or winding-up of the Company, the subordinated Debt Securities will be subordinated and postponed in right of payment to the prior payment in full of all other liabilities and indebtedness of the Company, other than indebtedness that, by its terms, ranks equally with, or subordinate to, such subordinated Debt Securities.

Any convertible or exchangeable Debt Securities will be convertible or exchangeable only for other securities of

the Company.

In conformity with applicable laws of Canada, for all bonds and notes of companies that are publicly offered, the Debt Securities will be governed by a document called an “indenture”. There will be a separate indenture for the senior Debt Securities and the subordinated Debt Securities. An indenture is a contract between a financial institution, acting on your behalf as trustee of the Debt Securities offered, and us. The trustee has two main roles. First, subject to some limitations on the extent to which the trustee can act on your behalf, the trustee can enforce your rights against us if we default on our obligations under the indenture. Second, the trustee performs certain administrative duties for us. The aggregate principal amount of Debt Securities that may be issued under each indenture is unlimited. A copy of the form of each indenture to be entered into in connection with offerings of Debt Securities will be filed with the applicable securities regulatory authorities in Canada when it is entered into. A copy of any indenture or supplement thereto entered into by us will be filed with securities regulatory authorities and will be available on our profile on SEDAR.

This Prospectus does not qualify for issuance Debt Securities in respect of which the payment of principal and/or interest may be determined, in whole or in part, by reference to one or more underlying interests including, for example, an equity or debt security, a statistical measure of economic or financial performance including, but not limited to, any currency, consumer price or mortgage index, or the price or value of one or more commodities, indices or other items, or any other item or formula, or any combination or basket of the foregoing items. For greater certainty, this Prospectus may qualify for issuance Debt Securities in respect of which the payment of principal and/or interest may be determined, in whole or in part, by reference to published rates of a central banking authority or one or more financial institutions, such as a prime rate or bankers’ acceptance rate, or to recognized market benchmark interest rates such as LIBOR, EURIBOR or a United States federal funds rate.

Selected provisions of the Debt Securities and the indenture(s) under which such Debt Securities will be issued are summarized below. This summary is not complete. The statements made in this Prospectus relating to any indenture and Debt Securities to be issued thereunder are summaries of certain anticipated provisions thereof and are subject to, and are qualified in their entirety by reference to, all provisions of the applicable indenture. The indentures will not limit the amount of Debt Securities that we may issue thereunder. We may issue Debt Securities from time to time under an indenture in one or more series by entering into supplemental indentures or by our board of directors or a duly authorized committee authorizing the issuance. The Debt Securities of a series need not be issued at the same time, bear interest at the same rate or mature on the same date.

The Prospectus Supplement for a particular series of Debt Securities will disclose the specific terms of such Debt Securities, including the price or prices at which the Debt Securities to be offered will be issued. The terms and provisions of any Debt Securities offered under a Prospectus Supplement may differ from the terms described below, and may not be subject to or contain any or all of such terms. Those terms may include some or all of the following:

the designation, aggregate principal amount and authorized denominations of such Debt Securities;
the indenture under which such Debt Securities will be issued and the trustee(s) thereunder;

the currency or currency units for which the Debt Securities may be purchased and the currency or currency unit in which the principal and any interest is payable (in either case, if other than Canadian dollars);
whether such Debt Securities are senior or subordinated and, if subordinated, the applicable subordination provisions;
the percentage of the principal amount at which such Debt Securities will be issued;
the date or dates on which such Debt Securities will mature;
the rate or rates per annum at which such Debt Securities will bear interest (if any), or the method of determination of such rates (if any);
the dates on which any such interest will be payable and the record dates for such payments;
any redemption term or terms under which such Debt Securities may be defeased;
whether such Debt Securities are to be issued in registered form, bearer form or in the form of temporary or permanent global securities and the basis of exchange, transfer and ownership thereof;
the place or places where principal, premium and interest will be payable;
the designation and terms of any other Securities with which the Debt Securities will be offered, if any, and the principal amount of Debt Securities that will be offered with each Security;
the securities exchange(s) on which such series of Debt Securities will be listed, if any;
any terms relating to the modification, amendment or waiver of any terms of such Debt Securities or the applicable indenture;
any change in the right of the trustee or the holders to declare the principal, premium and interest with respect to such series of debt securities to be due and payable;
governing law;
any limit upon the aggregate principal amount of the Debt Securities of such series that may be authenticated and delivered under the indenture;
if other than the Company or the trustee, the identity of each registrar and/or paying agent;
if the Debt Securities are issued as a Unit with another Security, the date on and after which the Debt Securities and other Security will be separately transferable;
if the Debt Securities are to be issued upon the exercise of Warrants, the time, manner and place for such Securities to be authenticated and delivered;
if the Debt Securities are to be convertible or exchangeable into other securities of the Company, the terms and procedures for the conversion or exchange of the Debt Securities into other securities; and
any other specific terms of the Debt Securities of such series, including any events of default or covenants.

Subscription Receipts

Subscription Receipts may be offered separately or together with other Securities, as the case may be. The Subscription Receipts may be issued under a subscription receipt agreement.

The applicable Prospectus Supplement will include details of any subscription receipt agreement covering the Subscription Receipts being offered. A copy of any subscription receipt agreement relating to an offering of Subscription Receipts will be filed by the Company with the relevant securities regulatory authorities in Canada after the Company has entered into it. The specific terms of the Subscription Receipts, and the extent to which the general terms described in this section apply to those Subscription Receipts, will be set forth in the applicable Prospectus Supplement. This description may include, without limitation, the following (where applicable):

the number of Subscription Receipts;
the price at which the Subscription Receipts will be offered;

the terms, conditions and procedures for the conversion of the Subscription Receipts into other Securities;
the designation, number and terms of the other Securities that may be exchanged upon conversion of each Subscription Receipt;
the designation, number and terms of other Securities with which the Subscription Receipts will be offered, if any, and the number of Subscription Receipts that will be offered with each Security;
terms applicable to the gross or net proceeds from the sale of the Subscription Receipts plus any interest earned thereon;
certain material Canadian tax consequences of owning the Subscription Receipts; and
any other material terms and conditions of the Subscription Receipts.

PLAN OF DISTRIBUTION

General

The Company may from time to time during the 25-month period that this Prospectus, including any amendments and supplements hereto, remains valid, offer for sale and sell up to an aggregate of $65,000,000 in Securities hereunder.

The Securities may be sold by us (i) directly pursuant to applicable statutory exemptions, (ii) to or through underwriters or dealers, or (iii) through designated agents. The Prospectus Supplement relating to a particular offering of Securities will identify any underwriter, dealer or agent engaged in connection with the offering and sale of such Securities, and will set forth the terms of the offering of such Securities, including, to the extent applicable, any fees, discounts or any other compensation payable to underwriters, dealers or agents in connection with the offering, the method of distribution of the Securities, the purchase price of the Securities (or the manner of determination thereof if offered on a non-fixed price basis), the net proceeds to us and any other material terms of the plan of distribution (including sales in transactions that are deemed to be “at-the-market distributions” as defined in NI 44-102). Any initial offering price and discounts, concessions or commissions allowed or re-allowed or paid to underwriters, dealers or agents may be changed from time to time. Only underwriters named in the Prospectus Supplement are deemed to be underwriters in connection with our Securities offered by that Prospectus Supplement.

The Securities may be sold from time to time in one or more transactions at a fixed price or prices or at non-fixed prices. If offered on a non-fixed price basis, the Securities may be offered at market prices prevailing at the time of sale, at prices determined by reference to the prevailing price of a specified security in a specified market or at prices to be negotiated with purchasers including sales in transactions that are deemed to be “at-the-market” distributions, including sales made directly on the TSXV or other existing trading markets for the Securities, in which case the compensation payable to an underwriter, dealer or agent in connection with any such sale will be decreased by the amount, if any, by which the aggregate price paid for the Securities by the purchasers is less than the gross proceeds paid by the underwriter, dealer or agent to the Company. The price at which the Securities will be offered and sold may vary from purchaser to purchaser and during the period of distribution.

Sales of Securities under an “at-the-market distribution”, if any, will be made pursuant to an accompanying Prospectus Supplement. Sales of Securities under any “at-the-market” program will be made in transactions that are “at-the-market distributions” as defined in NI 44-102. The volume and timing of any “at-the-market distributions” will be determined at the Company’s sole discretion.

No underwriter or dealer involved in an “at-the-market distribution” under this Prospectus, no affiliate of such an underwriter or dealer and no person or company acting jointly or in concert with such an underwriter or dealer will over-allot securities in connection with such distribution or effect any other transactions that are intended to stabilize or maintain the market price of the offered Securities or securities of the same class as the Securities distributed under the “at-the-market distribution”, including selling an aggregate number or principal amount of Securities that would result in the underwriter creating an over-allocation position in the Securities.

In connection with the sale of the Securities, underwriters, dealers or agents may receive compensation from the Company including in the form of underwriters’, dealers’ or agents’ fees, commissions or concessions.

Underwriters, dealers and agents that participate in the distribution of the Securities may be deemed to be underwriters for the purposes of applicable Canadian securities legislation and any such compensation that they receive from the Company and any profit that they make on the resale of the Securities, may be deemed to be underwriting commissions.

Underwriters, dealers or agents who participate in the distribution of the Securities may be entitled, under agreements to be entered into with the Company to indemnification by the Company against certain liabilities, including liabilities under Canadian securities legislation, or to contribution with respect to payments, which such underwriters, dealers or agents may be required to make in respect thereof. Such underwriters, dealers and agents may be customers of, engage in transactions with, or perform services for, the Company in the ordinary course of business.

In connection with any offering of Securities, subject to applicable laws and other than an “at-the-market distribution”, the underwriters, dealers or agents, as the case may be, may over-allot or effect transactions which stabilize, maintain or otherwise affect the market price of the offered Securities at a level other than those which otherwise might prevail on the open market. Such transactions may be commenced, interrupted or discontinued at any time.

Offerings in the United States

The Securities have not been, and will not be, registered under the U.S. Securities Act or any state securities laws and, subject to certain exceptions, may not be offered or sold or otherwise transferred or disposed of in the United States absent registration or pursuant to an applicable exemption from registration under the U.S. Securities Act and applicable state securities laws. In addition, until 40 days after the commencement of an offering of Securities under any applicable Prospectus Supplement, an offer or sale of Securities within the United States by any dealer (whether or not participating in the offering of Securities) may violate the registration requirements of the U.S. Securities Act if such offer is made otherwise than in reliance on an exemption from the registration requirements of the U.S. Securities Act.

RISK FACTORS

An investment in the Securities involves a high degree of risk and must be considered speculative due to the nature of the Company’s business and present stage of development. Before making an investment decision, prospective purchasers of Securities should carefully consider the information described in this Prospectus and the documents incorporated by reference herein, including the applicable Prospectus Supplement. There are certain risks inherent in an investment in the Securities, including the factors described below and under the heading “ Risk Factors ” in the Annual Information Form and under the heading “Risks and Uncertainties” in the Annual MD&A, and any other risk factors described herein or in a document incorporated by reference herein, which investors should carefully consider before investing . Additional risk factors relating to a specific offering of Securities will be described in the applicable Prospectus Supplement. Some of the factors described herein, in the documents incorporated by reference herein, and/or the applicable Prospectus Supplement are interrelated and, consequently, investors should treat such risk factors as a whole. If any of the risk factors described herein, in the Annual Information Form, in another document incorporated by reference herein or in the applicable Prospectus Supplement occur, it could have a material adverse effect on the business, financial condition and results of operations of the Company. Additional risks and uncertainties of which the Company currently is unaware or that are unknown or that it currently deems to be immaterial could have a material adverse effect on the Company’s business, financial condition and results of operation. The Company cannot assure purchasers that it will successfully address any or all of these risks. There is no assurance that any risk management steps taken will avoid future loss due to the occurrence of the risks described herein, in the Annual Information Form, in the other documents incorporated by reference herein or in the applicable Prospectus Supplement or other unforeseen risks.

Implications of the COVID-19 Pandemic

The global outbreak of COVID-19 has resulted in governments worldwide enacting emergency measures to protect against the spread of the virus. These measures, which include, among other things, limitations on travel, selfimposed quarantine periods and social distancing measures, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of any government and/or central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future periods.

Global pandemics (like the COVID-19 Pandemic) and other public health threats, or a fear thereof, could adversely impact our production operations, sales efforts, lead to labour shortages, and severely impact supply chain logistics including travel and shipping disruptions and shutdowns (including as a result of government regulation and prevention measures) affecting production and delivery of the raw materials we need to operate and deliver our products to customers. It is unknown whether and how the Company may be affected if such an occurrence persists for an extended period of time but we anticipate that it would have a material adverse effect on our business, operating results and financial performance. In addition, the Company may also be required to incur additional expenses and/or delays relating to such events which could have a further negative impact on our business, operating results and financial performance.

The risks associated with global COVID-19 measures, and the Company’s own protocols, may have a material impact on the Company’s ability to grow its business and generate revenue, which in turn could materially impact the Company’s financial condition and results from operations. The Company is actively addressing risks to its business from COVID-19 through a broad range of measures throughout its structure and is re-assessing its response to the COVID-19 pandemic on an ongoing basis. For additional information see, “The Company – Recent Developments – COVID-19 Pandemic” .

Risks Related to the Offering

An Investment in the Securities is Speculative

An investment in the Securities and the Company’s prospects generally, are speculative due to the risky nature of its business and the present state of its development. Investors may lose their entire investment and should carefully consider the risk factors described below and under the heading “ Risk Factors ” in the Annual Information Form.

Negative Cash Flow from Operations

The Company had negative operating cash flow for the financial years ended December 31, 2019 and 2018. As at September 30, 2020, the Company had a working capital balance of $6,783,092. The Company cannot guarantee it will have a cash flow positive status in the future due to its desire to increase the number of employees. To the extent that the Company has negative cash flow in any future period, certain of the proceeds from the Offering may be used to fund such negative cash flow from operating activities.

Discretion in the Use of Proceeds

While detailed information regarding the use of proceeds from the sale of the Securities will be described in the applicable Prospectus Supplement, the Company will have broad discretion over the use of net proceeds from an offering by the Company of its securities. There may be circumstances where, for sound business reasons, a reallocation of funds may be deemed prudent or necessary. In such circumstances, the net proceeds will be reallocated at the Company’s sole discretion.

Management will have discretion concerning the use of proceeds scribed in the applicable Prospectus Supplement as well as the timing of their expenditures. As a result, an investor will be relying on the judgment of management for the application of the proceeds. Management may use the net proceeds described in a Prospectus Supplement

in ways that an investor may not consider desirable. The results and the effectiveness of the application of the proceeds are uncertain. If the proceeds are not applied effectively, the Company’s results of operations may suffer.

Additional Financing

The continued development of the Company will require additional financing. There is no guarantee that the Company will be able to achieve its business objectives, including with respect to the expansion of its product offerings, completing future acquisitions, and entering into strategic partnerships. The Company intends to fund its business objectives by way of additional offerings of equity and/or debt financing as well as through anticipated positive cash flow from operations in the future. The failure to raise or procure such additional funds or the failure to achieve positive cash flow could result in the delay or indefinite postponement of current business objectives. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, will be on terms acceptable to the Company. If additional funds are raised by offering equity securities, existing shareholders could suffer significant dilution. The Company will then require additional financing to fund its operations until positive cash flow is achieved, see “ Risk Factors – Negative Cash Flow from Operations ”.

Volatile Market Price of Company’s Securities

The market price of the Company’s securities may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control. This volatility may affect the ability of holders of such securities to sell their securities at an advantageous price. Market price fluctuations in the Company’s securities may be due to the Company’s operating results failing to meet expectations of securities analysts or investors in any period, downward revision in securities analysts’ estimates, adverse changes in general market conditions or economic trends, acquisitions, dispositions or other material public announcements by government and regulatory authorities, the Company or its competitors, along with a variety of additional factors. These broad market fluctuations may adversely affect the market price of the securities of the Company.

Financial markets have at times historically experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Company’s securities may decline even if the Company’s operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, the Company’s operations could be adversely impacted and the trading price of the Company’s may be materially adversely affected. As at the date of this Prospectus, only the Common Shares are listed on a securities exchange and may be purchased in the secondary market.

Risk Factors Related to Dilution

The Company may issue additional securities in the future, which may dilute a shareholder’s holdings in the Company. The Company’s articles permit the issuance of an unlimited number of Common Shares, and shareholders will have no pre-emptive rights in connection with such further issuance. The directors of the Company have discretion to determine the price and the terms of further issuances. Moreover, additional Common Shares will be issued by the Company on the exercise of options under the Company’s stock option plan and upon the exercise of outstanding Warrants.

Market for Securities

There is currently no market through which the Securities, other than the Common Shares, may be sold and, unless otherwise specified in the applicable Prospectus Supplement, such unlisted Securities may not be listed on any securities or stock exchange or any automated dealer quotation system. As a consequence, purchasers may not be able to resell such unlisted Securities purchased under this Prospectus. This may affect the pricing of our Securities, other than our Common Shares, in the secondary market, the transparency and availability of trading prices, the liquidity of these Securities and the extent of issuer regulation. There can be no assurance that an

active trading market for our Securities, other than our Common Shares, will develop or, if developed, that any such market, including for our Common Shares, will be sustained.

Profitability

There is no assurance that the Company will earn profits in the future, or that profitability will be sustained. The marine robotics industry requires significant financial resources, and there is no assurance that future revenues will be sufficient to generate the funds required to continue the Company’s business development and marketing activities. If the Company does not have sufficient capital to fund its operations, it may be required to reduce its research and development efforts or in the future reduce its marketing efforts or forego certain business opportunities.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The applicable Prospectus Supplement will include a general summary of certain Canadian federal income tax consequences which may be applicable to a purchaser of Securities offered thereunder. Investors should read the tax discussion in any Prospectus Supplement with respect to a particular offering and consult their own tax advisors with respect to their own particular circumstances.

LEGAL MATTERS

Certain legal matters in connection with the offering of the Securities will be passed upon by Gowling WLG (Canada) LLP on behalf of the Company. As at the date hereof, the designated professionals of Gowling WLG (Canada) LLP, as a group, beneficially own, directly or indirectly, less than one percent of the securities of the Company.

AUDITORS, TRANSFER AGENT AND REGISTRAR

KPMG LLP are the auditors of the Company and have confirmed that they are independent of the Company within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulation.

The registrar and transfer agent for the Common Shares is Computershare Investor Services Inc. with an office at 510 Burrard Street, 2nd Floor Vancouver, British Columbia V6C 3B9.

STATUTORY AND CONTRACTUAL RIGHTS OF WITHDRAWAL AND RESCISSION

Unless provided otherwise in a Prospectus Supplement, the following is a description of a purchaser’s statutory rights. Securities legislation in certain of the provinces and territories of Canada provides purchasers of the Securities with the right to withdraw from an agreement to purchase the Securities, which right may be exercised within two business days after receipt or deemed receipt of this Prospectus, the accompanying Prospectus Supplement and any amendment relating to the Securities purchased by a purchaser. In several of the provinces and territories, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price, or damages if the prospectus, prospectus supplement, and any amendment relating to securities purchased by a purchaser contains a misrepresentation or are not sent or delivered to the purchaser, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for the particulars of these rights or consult with a legal advisor.

Original purchasers of Securities under this Prospectus (as supplemented or amended) that are convertible, exchangeable or exercisable securities will be granted a contractual right of rescission against the Company in respect of the conversion, exchange or exercise of such Securities. The contractual right of rescission will entitle such original purchasers to receive, in addition to the amount paid on original purchase of any Securities, the amount paid upon conversion, exchange or exercise, upon surrender of the underlying securities gained thereby, in the event that this Prospectus (as supplemented or amended) contains a misrepresentation, provided that both the conversion, exchange or exercise occurs, and the right of rescission is exercised, within 180 days of the date of the purchase of the Securities under this Prospectus (as supplemented or amended).

In an offering of Securities, to the extent such securities are convertible, exchangeable or exercisable securities, investors are cautioned that the statutory right of action for damages for a misrepresentation contained in the Prospectus (as supplemented or amended) is limited, in certain provincial and territorial securities legislation, to the price at which the Securities are offered to the public under the prospectus offering. This means that, under the securities legislation of certain provinces and territories of Canada, if the purchaser pays additional amounts upon conversion, exchange or exercise, as applicable, of the Security, those amounts may not be recoverable under the statutory right of action for damages that applies in those provinces and territories of Canada. The purchaser should refer to any applicable provisions of applicable provincial or territorial securities legislation for the particulars of this right of action for damages or consult with a legal advisor.

CERTIFICATE OF THE COMPANY

Dated: April 6, 2021

This short form base shelf prospectus, together with the documents incorporated by reference, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces and territories of Canada.

(signed) “Karl Kenny” (signed) “Joseph MacKay” Chief Executive Officer Chief Financial Officer

On behalf of the Board of Directors

(signed) “Cathy Bennett” (signed) “Shaun McEwan” Director Director

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Kraken Robotics Inc. — Capital/Financing Update 2021

46335_rns_2021-04-06_9c50cdfe-4bee-4653-9c78-897341a580ef.pdf

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SHORT FORM BASE SHELF PROSPECTUS